In the olden days, awards were not given for innovation itself but for how effective an innovation was in relation to the importance of the problem it solved. But what we see today in financial inclusion is the ubiquity of innovation – often front and center – as the lead determinant in a plethora of prize competitions. Check the first judging criteria of this prestigious contest.

Why would the entity commissioning the award, TheWall Street Journal, care about how innovative or unique the business was or how it broke from tradition? Wouldn’t it care most about how well the service solved a problem and the problem’s significance?

In financial inclusion, innovation itself has been an endgame for quite some time. Take the much-hyped “Keep the Change,” Bank of America’s program to hoover in payment leftovers at the cash register. If you buy $3.80 worth of coffee, the amount is rounded to $4.00 of which twenty cents goes to your bank account. Greeted as a clever way to encourage savings, the idea was indeed innovative back in 2006. But was it good? Here is what a critic, citing another critic, had to say about Keep the Change: “If you want something that makes it quick and easy, lets you fool yourself into thinking you’re actually saving, (spend-to-save) programs are good.” But despite this perversion, Keep the Change has been the winner of multiple awards, many with innovation in their descriptions.

Plenty of ideas are creative and go nowhere. That’s where the ideas I have in the shower go, where they should, down the drain. But innovation is the crack-cocaine of the funding world. Funders including donors and impact investors want to be thought of as doing something new and what is newer than innovation? Innovation is the new excellence, the new buzzword, the new impact.

Design firms that feed funder appetite for innovation are generating an explosion of events that dub those in attendance “expert-for-a-day.” I just completed my third and possibly last human-centered hackathon, a forum that deemed every idea safe and every suggestion good, no matter how absurd. We were instructed as we brainstormed to stay mentally positive and intellectually curious, even if what was on offer was decidedly insane. This open-mindedness, we were told, was the heart of the innovation process. But after a day of outlandish ideation, we were permitted little room to pronounce any proposal doomed or even dangerous. By the close of the workshop, we had offered up pounds of sticky-notes, colored dots, and Sharpies to the grand deity of design: the prototype. But to what end?

A Brazilian banker friend, in pleasantly accented English, reflected on his own experience a few years back where he had endured weeks and weeks of co-design and prototyping in the name of financial inclusion. The process was led by the very same firm that engineered Keep the Change. “It was all so exciting, so energizing,” he remembered. Asked how the product performed, he responded: “Oh, uptake was so low and usage lower.”

Innovation in financial inclusion is not a problem per se; it can be a path to socially important solutions. And, not all innovation is led by design firms, but rather by committed entrepreneurs and leaders. Yet, should innovation be a goal rewarded for its own sake? Should it be egged on by brainstorm-brokers who have no ultimate stake in the outcome, especially when those “innovated upon” can become exposed to extreme risk?

Glorifying, even fetishizing innovation in financial inclusion surely has its downsides. Perhaps the biggest is that no one knows what financial inclusion is. Back to the olden days: kings, their navies, and merchant mariners all felt the pinch of not knowing the location of their ships at sea. Only in determining both latitude and longitude could sailors fix their sea-going positions. The “un-longituded” had a problem that was precise, important and finally, though innovation, solved. But that’s not the case in financial inclusion. The problem is imprecise, and if you ask the “un-included,” depending on what scheme you are including them in, inclusion is often irrelevant.

Rewarding innovation qua innovation can point the arrows of effort and resources away from expanding proven concepts toward accelerating unproven ones. What about the long-established credit union extending business hours in a hard scrabble area or enabling the expansion (pg. 5) of a rural bank network? Tens of thousands of in-the-trenches improvements can advance good financial services, none of which may be particularly innovative or require expensive design processes, but many of which have demonstrated their relevance, are worthy of attention, and even deserve a prize.

Founding Sponsor

Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.

Note

The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.

12 comments

I think this is a terrific post that is long overdue. In fact, I have been working on a post about innovation drawing from what I took away from Walter Isaacson’s book “The Innovators” that aims to affirm and complement many of Kim’s excellent points. Now I’ll try to get it done, because much more rigorous thinking needs to be done about “innovation” and its role in advancing worthy goals, such as achieving full financial inclusion.

Kim, you have started an important conversation. Today, expanding proven solutions is increasingly marginalized, as you point out, as are age-old concepts such as competent execution, patient incrementalism, process innovation, effective leadership, and even social entrepreneurship. They are taken for granted, rarely supported, and focus on them is often seen as the pursuit of unambitious minds. At the same time, the concept of “innovation” in financial inclusion has been largely drained of its meaning. Who can name an organization in our movement that does not claim to be at the forefront of innovation?

Hello Alex – Agreed. A deeper look at what innovation is and can lead to is very needed. And thank you for the tip on Walter Isaacson’s book. I will check it out.

Open and faster thinking could be hugely useful in making old ideas more appealing and cherished by customers. One possibility in financial services is to bring great problem solving (innovation) to state-owned banks and this in many places is starting to happen. But the innovation that is valuable excludes gratuitous hype around process. And focuses on the real problems to be solved.

And, it need not be just brainstorming that brings these breakthroughs about. It could be simple-copy-catting of what has worked elsewhere – e.g. changing business hours, training friendly staff to speak used languages. Citibank in Germany years ago figured out that if they had staff that spoke Turkish they could profitably serve what would turn out to be a very loyal customer segment. Where is the discussion on taking solutions that have worked and diligently applying them where demand for such ideas exists? Thanks for charging ahead on this.

Bravo Kim, I totally agree with you. Many of the so called innovations are based on limited new evidence and once implemented are rarely allowed a long enough time to assess the true impact. Indeed, many financial service providers only look at ideas that are less than two years old, anything older is viewed as passé. Lastly much human design work seems to dictate new experiences for the researchers (their learning curve) while invalidating the knowledge gained over time through trust and confidence between parties and the success of many older ‘innovations’.

Trust really is the key to financial services (well, now identity seems to be the key, if one is fixated on supply) and it’s such an ancient, immutable idea. Do I trust Venmo? Not really but I trust it enough to have $40 in it. How about my Skype account? I trust that enough to have $23 in it. Would I expect an innovation that did not directly deal with trust to work? Sure, but just like Venmo and Skype. I would trust it just a little bit.

Very nice indeed, Kim. The odd thing to me is that in the financial inclusion space there is so much talk about innovation and yet so little that is really new. So much of innovation is approached primarily as a branding exercise. There is a real innovation deficit, and donors are rushing to supply it themselves –with prizes, pilots and showcases– rather than tackling the underlying issues that are causing such limited innovation to flourish. As Graham Wright has pointed out, a particularly unhelpful modern trend is for providers to treat innovation as an outsourceable activity, something you delegate to teams of colorful, energetic, and highly credentialed design consultants coming on voyages of discovery on tightly scheduled assignments.

In a market characterized by so many people being left out, underserved, or underwhelmed by what´s on offer, there ought to be a real opportunity for companies that try to tackle old problems in new ways. Not ignoring the lessons from the past, as Monique says, but still on a relentless mission to try and try again until they get it right. But that requires incorporating innovation –by which I mean the age-old procedure of variation and selection– as a core element of their operating model. Alas, I don´t see a role model.

Hello, Ignacio – You and Graham identified a serious problem with “innovation” – it’s outsourced and should be at the very core of the business. I would rather outsource the board and CEO than outsource than an organization’s ability to continually improve value for the customer. If you watch what is happening to the old fashioned business of Shake Shack, you can see that it is extremely customer-focused. How? By encouraging front line staff to make tons of small suggestions that improve the customer experience. It’s the Wall Street darling but is doing nothing fancy. Lot’s of incremental change that is not outsourced.

What this piece describes is actually what I feel is lacking in social and emotional awareness as a culture right now – even designers are taking the millennial stance that “all criticism is offensive” or “all ideas are good.”

Are we afraid to discern, as a culture? I like this piece… It represents everything that is happening with our need to move from all-out judgment to all-out inclusion. The pendulum cannot shift entirely to the other side if we expect long-term progress. Currently, no actual change can come because it’s locked in the state of “awesome.”

It basically is the result of an era of childhood education that thrived on “gold stars” for doing basic tasks – and that era continues in some areas, which is why I do what I do (as an early childhood advocate). Children who obtain gold stars for doing the obvious think they are amazing… when really, their artwork is just a keepsake, not an innovation, right? They become adults who expect the same praise for doing what is expected, not what is actually useful.

I’ll save more rants on this for later… but it’s terrific to see the wisdom represented here. It’s called perspective from our elders… and it’s required for our collective progress in any sector.

Dear Kim and others … thank you for your insights here on innovations. … But what about the ‘ratings’ of financial service providers conducted by the ‘Rating Companies’ using different indicators? I believe that some such ratings do misguide (social) investors, and other stakeholders.I remember institutions posted by Forbes magazine considered among global leaders … Who is rating the ‘rating’ agencies?? Thank you again. Getaneh

Hi, Kim, thank you for this very nice post and for pointing at the rather naive / uncritical positive view of innovation and the implicit disregard for proven (but “boring”) solutions. While innovation can help address unsolved problems, I think that also more emphasis has to be placed on the process of piloting and testing innovations before they can be brought to scale. New things are by nature risky and it is important that such risks are dealt with in a responsible manner, before they affect and harm larger numbers of people. In the financial space, we have to be particularly careful with the safety of innovations that may put poor people’s money at risk, e.g, innovations in the areas of savings and insurance, but also of payments and remittances, ensuring transparency, suitable risk mitigation arrangements and solid oversight.

I hate to just echo everyone’s Kudos, but I think you may have hit a nerve with some of us who have been doing this more than a few years. Thanks again! What I wanted to explore further- please indulge me sometime – is this point you make: “Innovation in financial inclusion is not a problem per se; it can be a path to socially important solutions. And, not all innovation is led by design firms, but rather by committed entrepreneurs and leaders. ” We are pursuing solutions to a problem that end clients have not necessarily recognized (is it even a problem?). It’s a supply-side intervention regardless of how much we put ourselves in users’ shoes to fill out the details. I’ll stop here lest I give away my recent existential concerns, but hopefully, we can continue this line of discussion!

Great article, Kim. I hope this adds – albeit from a different perspective. I work for a niche technology provider. Our main product has been prepaid mobile recharge technology and we do it well. This product serves a real market need and can offer material, measurable benefits – relative to alternate recharge methods – to customer, distribution and service providers. A few years ago, we felt the time was right to ‘innovate’ and we developed good, mobile wallet technology (using M-Pesa as a benchmark). We won deals but found deployments floundered as customers tried to offer ‘innovative’ solutions to too many ‘problems’ or, more fundamentally, issues which weren’t really problems in the first place. I went to India to meet a potential partner and saw: biometrics used in sandstorm conditions; and highly sophisticated terminals in places where communication network signal strength and power were far from dependable. The technology worked when the wind was in the right direction and the end users were quick & patient to understand and use – admirably so given illiteracy, etc…. But inevitably something failed (cloud, communications, process), and monies could not be used. So end users returned to less innovative alternatives (cash, bartering, collectives) and found they met most of their basic needs anyway. In conclusion, much of the innovation we experienced (e.g. our designs, partner must-haves) looks in retrospect to be innovative technology solutions lacking market need and/or failing to offer benefits compared to existing services.

Dear Kim,
It seems that you have stirred the hornet’s nest and would cause a sense of discomfort amongst a larger “innovations”, obsessed community. Most of the time people forget that their innovation has no taker due to a variety of reasons but still they want to push that for the sake of some award or to appear innovative in their approach. Most of these categories of innovations are well funded and rewarded thus encouraging them to do more and more.

On the other hand, we need to realize that it is the incremental innovation which is making most of the impact and that remain largely ignored. A large number of basic innovations have already taken place and most of the new stuff is re-packaging and new labels with some tweaks.

As it is commonly said in capital market that market may remain irrational for longer than you expect. So we have to continue to see these in times to come.